The EU Pay Transparency Directive and worker rights to salary information

Did you know the EU Pay Transparency Directive includes changes to employee rights to information on salary?

There are two key rulings that are relevant:

• Article 6 – transparency of pay across job levels and career progression policies
• Article 7 – employee right to pay information

Let’s take a closer look at both of these.

Article 6: Pay and career progression transparency

Article 6 of the EU Pay Transparency Directive rules that employers must make two things ‘easily accessible’ to employees:

1. Criteria used to determine how pay changes across the company’s job levels
2. The criteria for determining career progression across the levels.

That might include, for example, skills and competencies, autonomy, business impact etc that is expected for each job level within the company’s overall hierarchy.

Typically these are defined within your compensation strategy, as part of your level framework.

The Directive also states that the criteria must be gender neutral i.e. there must be no difference in pay and career progression across levels between men and women.

Article 7: Employee right to information

Article 7 of the EU Pay Transparency Directive effectively bans pay secrecy by employers.

It rules that employees have the right to:

• Request information about their own pay level
• Request information about the average pay levels for other employees doing equal work or work of equal value to them, broken down by sex
• Disclose information about pay with their colleagues – if it’s for the purpose of determining if there is pay discrimination occurring.

And the employer must:

• Inform all employees once per year about their right to receive the information above
• Provide requested information within ‘a reasonable period of time’

How does this work with GDPR and data privacy?

Good question!

This is one of the murkier areas of the EU Pay Transparency Directive.

The disclosure of salary information under Article 7 is specifically ‘pay levels’ rather than specific salaries. But, there could conceivably be instances when this leads to personal data being identified or closely inferred – if there is a pay level which includes very few employees.

Article 12 of the Directive covers data protection with three key takeaways:

• Any processing of personal data required for Article 7 (as well as for gender pay gap reporting requirements) must be provided in line with GDPR.
• Personal data processed in compliance with the EU Pay Transparency Directive must not be used for any application other than equal pay.
• Member states may decide that if the disclosure of pay information to comply with an employee request under Article 7 would result in an individuals salary being identifiable, then the employer must not disclose directly to the employee but rather to a workers’ representative or equality body, who will inform the employee without disclosing actual salaries.

So, this is covered by the Directive, but it’s one of the areas that is up to individual EU member states to interrogate and bring into law.

Therefore, exactly how the relationship between data protection and pay disclosure will work remains to be seen as the legislation is rolled out across countries – but it’s a clear tension in the legislation which is already being highlighted in analyses of the Directive.

Why are these rulings included in the EU Pay Transparency Directive?

So, that’s the Article 6 and 7 rulings.

Why have they been included?

Well, the core principle behind the EU Pay Transparency Directive is that equal work (or work of equal value) should receive equal pay.

As is stands, that isn’t always the case, especially because of pay discrimination based on gender – especially the gender pay gap.

If this pay discrimination isn’t visible, it will never be properly addressed, which is why the Directive is introducing consistent legislation to improve pay transparency.

Employees can’t assess if they are being paid unfairly and enforce their right to equal pay if they only have access to their own salary information, without the context of a) how their salary fits into the wider salary and progression structure across the company and b) how their colleagues that perform equal work are being paid.

Historically, salary has been a pretty taboo subject to talk about with colleagues. Some companies have even included a pay secrecy clause in employment contracts to prevent this from happening.

So these rulings are there to change that.

And they’re beneficial for employers too.

We know that, despite the taboo, many employees do already commonly discuss salary with their peers.

When that’s done behind the scenes and it arises that there are pay disparities occurring, it can spark discontent amongst employees – which is difficult for HR and people teams to address.

What action(s) does my company need to take to prepare?

If your company is based in the EU or hires in the EU what do you need to do to prepare for these changes on employees’ right to information about salaries and career progression?

Here are 4 actions to consider:

1. Audit your level framework, career progression framework, and salary bands with employees in the context of whether you would feel comfortable with employees accessing them
2. Identify and address any issues that are spotted during the audit – any internal pay equity issues across levels and genders
3. Ensure the criteria used to determine career and pay progression across job levels are a) gender neutral, b) documented, and c) there’s an ‘easily accessible’ place the criteria can live e.g. in an employee handbook or intranet
4. Decide the process and timing for informing employees annually about their right to receive salary and career progression information from you.

This can feel uncomfortable for employers – it’s a level of transparency we aren’t yet used to, and it can feel like it will cause questions and unrest.

But, keep in mind that the legislation is ultimately for progress towards greater compensation fairness and better compensation conversations – which can only lead to happier and more motivated employees.